US Taxes on RRSP/RRIF Withdrawals for US Citizen Living in

[rgiustini]

I emigrated from Canada to the US is 1999. In the tax return filed for 1999, the accountant who prepared the return added a statement to the US 1040 that "The taxpayer and spouse hereby elect to defer tax on accrued income on Canadian trusts in which they are beneficiaries which are intended to provide pension, retirement or employee benefits".

For tax years 2000 and forward, I have filed the US tax returns, complete with appropriate declarations (Rev Proc 2002-23, TD F 90 22-1, Notice 22003-75, Form 8891 as appropriate to that year), deferring US tax on RRSP earnings.

I also have all my RRSP statements, so I know the cost basis of the RRSPs at the time of entry to the US.

What I do not understand is what will be taxable in the US once I begin making withdrawals. I have read (Gordon Pape) that I could have escaped paying US taxes on the RRSP basis at time of entry, had I filed this request with the IRS in my 1999 return, but since assume the statement in my 1999 US tax return did not do that, all withdrawals (basis and earnings on which US taxes have been deferred) will be taxable in the US.

Is that correct? Is it now too late to "escape" paying US tax on the RRSP basis, or can I still refer to my records at time of withdrawal and pay US tax only on the earnings above basis value? I underatand that I will also pay a Canadian withholding tax for periodic distributions of 15%. Is that also correct?

[nelsona]

Nothing has changed. You are still not liable for any US tax on your RRSPO value from before your move. Your 1999 staement was and is sufficient.

You will simply pay on the post-1999 growth.

[rgiustini]

Thank you so much! One more thing. How are the annual withdrawals to be accounted in terms of the taxed versus untaxed portion? Is the taxable amount removed first, or the tax free amount first, or is it on a pro rata basis, according to the proportion of each in the plan? Since I have two RRSPs, do I count the total of both in any pro rata withdrawals (I assume US IRAs are not part of this calculation)?

Do I have a choice in the withdrawal methodology I select, and if I do have a choice, do I have to use it consistently each year?

Again, thank you for your valued response to this inquiry.

[nelsona]

There are other threads that explain this.


Once you choose, stick with it.